Ravi Menon of MAS spoke at the Money20/20 Conference in Singapore about the current state of thinking on crypto assets (or crypto tokens), along with the evolving regulatory approach of Singapore. Mr. Menon added that MAS has, to-date, chosen not to regulate crypto tokens directly. However, it is focusing on the activities associated with crypto tokens, evaluating the different kinds of risks these activities pose, and considering the appropriate regulatory responses.
Mr. Menon highlighted that the key risks that MAS is monitoring in the crypto world are in the areas of financial stability, money laundering, investor protection, and market functioning:
- Financial stability. MAS and other regulators are studying the nexus between the crypto world and the financial system to assess how risks to financial stability may be transmitted. MAS assesses that the nature and scale of crypto token activities in Singapore do not currently pose a significant risk to financial stability. However, this situation could change; thus, MAS is closely watching this space.
- Money laundering. A clear and present danger posed by some crypto token activity is money laundering and terrorism financing. Intermediaries dealing in crypto tokens are already required to report any suspicious transactions to the Commercial Affairs Department. In addition, the proposed Payment Services Bill will require intermediaries that buy, sell, or exchange virtual currencies to specifically address money laundering and terrorism financing risks. Intermediaries will be required to conduct customer due diligence and establish controls and processes that are commensurate with their risks.
- Investor protection. Where crypto tokens represent ownership or a security interest over an issuer's assets or any property, or a debt owed by the issuer, they may be regarded as securities under the Securities and Futures Act. This means that, unless exempted, issuers must comply with prospectus requirements prior to the offer of such tokens; intermediaries dealing in such tokens must meet licensing requirements; and platforms facilitating secondary trading of tokens must be approved or recognized by MAS. MAS has advised the public to act with extreme caution, should they wish to invest in crypto tokens.
- Market functioning. Several cryptocurrency exchanges abroad have suffered cyber attacks and theft of their crypto tokens, along with reports of rampant market manipulation and other fraudulent activities on crypto-exchanges. "We are watching with interest developments in the US, where futures contracts based on crypto tokens have been introduced on regulated exchanges," said Mr. Menon. These exchanges have clear rules governing trade and post-trade activities. Such products could also potentially have a stabilizing influence on crypto token prices. However, regulation cannot address all the concerns around crypto tokens. The industry too has a part to play in strengthening the ecosystem—for instance, by adopting best practices around transparency, cybersecurity, and recordkeeping.
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